- The Washington Times - Wednesday, March 10, 2010

Federal investigators have received more than 730 allegations of waste or fraud in stimulus act funding so far, have canceled the contracts of some bad actors and have sent a couple of dozen cases to the FBI, the Internal Revenue Service and prosecutors.

As the pace of spending peaks, continuing to police the $862 billion will take a huge portion of investigators’ resources over the next year - as much as 60 percent of some inspector generals’ budgets, according to a report released Tuesday by Sen. Mark Pryor, Arkansas Democrat, who has taken a keen interest in weeding out fraud from stimulus spending.

One auditor warned that reports of fraud are expected to increase as the money continues to flow.

“HUD reports that they have obligated 98 percent of [stimulus] funds. However, the majority of these funds have not yet been received by grantees,” Kenneth M. Donohue, inspector general at the Department of Housing and Urban Development, said in a letter to Mr. Pryor. “While it is early in the process, we anticipate seeing trends of waste, fraud and abuse once the grants are received, especially in light of the results of our capacity reviews.”

Mr. Donohue said his office already has conducted more than 50 audits of Recovery Act spending and found a number of local housing authorities who aren’t up to managing or administering the grants they’ve been given or, in at least one case, an agency that was using stimulus money to replace other money, in violation of its contract with the department.

He said 13 investigations could result in criminal cases.

Mr. Pryor, declaring “there is zero room for fraud,” said the money must be protected to create jobs and revive the economy.

“That means ensuring our federal watchdogs root out inefficiency and fraud in stimulus spending. It means wrongdoing will be publicized, and fraudsters will be caught and punished,” the senator said.

Congress passed the American Recovery and Reinvestment Act in February 2009, and President Obama quickly tapped Vice President Joseph R. Biden Jr. to oversee the spending and work to prevent waste, fraud and abuse.

In his one-year report last month, Mr. Biden said the incidence of fraud was lower than expected and lower than what is typical in both private and government spending.

In January, Mr. Pryor, a member of the Senate Homeland Security and Governmental Affairs Committee, asked inspectors general at 21 agencies or departments that oversee stimulus funds to report to him on their investigations so far.

Each IG office replied with a letter, and the data show 739 total complaints. Of those, 220 cases have been closed and the rest are either still under investigation, are awaiting assignment or have been referred for discipline.

The IGs said they have sent 19 cases to U.S. attorneys, two cases to the FBI and three cases to the IRS.

Auditors said federal prosecutors have declined to handle at least two cases - one from the Social Security Administration and the other from the Defense Department - saying the dollar amount was too small for them to bother.

The Social Security Administration’s inspector general didn’t return a message left seeking comment. A spokesman for the Defense Department auditor said the case has been sent to Georgia’s attorney general to determine whether to prosecute.

Because of the ongoing case, the Defense Department inspector general’s office could not state the dollar amount involved, and the Georgia attorney general’s office didn’t respond to a message seeking comment Tuesday afternoon.

A CNN poll taken in January found that nearly three-fourths of Americans think at least half of stimulus money spent so far has been wasted.

The price tag from the Recovery Act has jumped from an initial $787 billion estimate to $862 billion - at least in part because of unexpectedly high unemployment payments as the jobless rate has soared to near 10 percent, or well beyond the intended limit.

The Washington Times reported in January that even some Republicans have privately acknowledged that the measure is creating jobs in their home states, and congressional Democrats have turned back every attempt to repeal or redirect stimulus money.

Liz Oxhorn, a White House spokeswoman for the Recovery Act, said officials are working closely with the auditors and Earl Devaney, who is in charge of stimulus accountability, to root out fraud.

“As Devaney has said, ‘I haven’t seen as much fraud as I first might have imagined there to be,’ ” she said. “We congratulate Senator Pryor on his excellent work on this issue as well. Working together, we can make sure that this program sets the standard for preventing and combating fraud.”

The Recovery Act set aside $205 million for auditors to track spending and root out fraud, in addition to regular annual appropriations. The Education Department’s inspector general said 60 percent of its total resources this year will go to tracking stimulus spending, while other agencies estimated figures between 4 percent and 40 percent.

• Stephen Dinan can be reached at sdinan@washingtontimes.com.

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